Omega

Yet Another Greek Letter

With so many alphas, betas, and deltas floating around the money management business, perhaps the last thing many readers care to hear is that yet another Greek letter has taken the field. "Omega" is the letter some researchers are using to describe what's left over after adjusting a money manager's returns for risk. Hold on, you say: isn't alpha the Greek letter that symbolizes risk-adjusted excess returns? Yes, but alphas adjust for market risk whereas omegas adjust for so-called style risk. Style risk means deviation from a manager's prespecified selection universe (e.g., large cap growth stocks).